The government has granted conditional licences to 350 non-governmental organisations (NGOs) over the past year and a half to expand microcredit operations throughout the country.
Starting in late December 2021, the Microcredit Regulatory Authority (MRA) issued around 200 licences in 2022 and another 150 licences until June 2023.
These licences are valid for three years, during which the NGOs must fulfil specific criteria to obtain final licences.
According to the conditions, each NGO in the first year must have a minimum of 300 small clients and outstanding loans totalling Tk 4 million. In the second year, the number of clients must increase to 600 and outstanding loans must amount to Tk 7 million.
By the third year, the NGOs must have a minimum of 1,000 clients, with outstanding loans of Tk 10 million.
To commence operations, each NGO had to deposit Tk 3 million into a bank account. This amount will be used to provide small loans, subject to the approval of the MRA.
The MRA began granting licences in December of last year after an eight-year pause, to boost small-loan outreach.
In February 2021, the regulator invited applications following the growing interest among new NGOs, which sought licences to provide loans to impoverished individuals as part of the government's efforts to foster self-reliance through vocational pursuits.
NGOs registered under any of these laws - the Societies Registration Act, the Trust Act 1882, the Voluntary Social Welfare Agencies (Registration and Control) Ordinance 1961 and the Company Act 1994 - were eligible to apply for licences.
NGOs engaged in various development activities, excluding microcredit operations, also met the requirements for obtaining a licence.
MRA Director Zillur Rahman previously said that the evaluation process for all applications might take around three years.
"We lack manpower. It will take a lot of time to evaluate all applications... it may take three years," he told the FE.
In July 2006, the then-government enacted the Microcredit Regulatory Authority Act 2006 to establish a regulatory framework for NGOs-MFIs. The act became effective on August 27, 2006.
Subsequently, the MRA initiated the first round of applications for microcredit operations, particularly to legalise those that were already in operation.
"We received 4,300 applications in 2006-07, but found only 758 NGOs competent for microcredit operations," the then MRA Director, Mohammad Yakub Hossain, told the FE.
In the second phase, the MRA invited applications from 37 poverty-stricken districts and received 1,212 bids.
The regulator designated these areas to prevent overlap in small lending and borrowing services and to support the government's poverty alleviation programmes.
After three years of observation, the MRA in 2014 awarded 122 licences.
However, the regulator has revoked the licences of 151 NGOs-MFIs in different stages due to compliance-related deficiencies. Currently, around 750 NGOs-MFIs are operating under the regulator.
The registered MFIs serve more than 40 million of the country's estimated 160 million people.
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